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Analysts Question Idea Of Climate-Related Financial Disclosures

A global task force wants companies to disclose the financial risks of climate change.


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Should companies be more public about how climate change will impact their finances?

An international task force says yes, they should. But some analysts are now saying it’s not such a great idea.

Last year the G20-backed Task Force on Climate-related Financial Disclosures said companies, including those in oil and gas, should tell investors about the financial risks of a changing climate. The report said companies should understand a transition to a lower-carbon economy, like the one outlined in the Paris climate deal, means a move away from fossil fuels.

Finance ministers from Canada, France and other countries discuss implementing the Paris climate agreement in August 2016.

But analysts with the major firm IHS Markit say the recommendations amount to an unfair burden that could hurt the oil business.

“The end result is really to put energy companies into a kind of penalty box, in terms of their finical reporting,” says Daniel Yergin, the firm’s vice chairman.

"This would take reporting that really is more appropriate for other governmental authorities, say environmental authorities, and turn it into part of the financial reports, and it's not clear at all how this helps investors.”

The task force ays investors will be smarter with their money if they know more about possible climate risks. But the IHS Markit rebuttal says it's too hard to predict those risks, so trying to could mislead investors.

Yergin says ultimately, the recommendations could pose "major obstacles" for capital spending in the energy industry. This summer a G20 summit will consider the recommendations.